Oct

U.K. Retail Sales, U.S. Building Permits & Housing Starts, Federal Budget Balance

18/10/2024 - 07:53 UTC

The U.S. dollar steadied against most of its major peers on Thursday, with the dollar index (USDX) hovering around two-month highs on the back of lower expectations for significant rate cuts by the Federal Reserve as well as expectations a potential victory for former President Trump in the upcoming election. Robust U.S. retail sales data and a resilient labor market reinforced expectations among traders that the Federal Reserve would implement a 25 basis point interest rate cut in November. As the U.S. presidential election approaches, investors are closely monitoring the race and its potential influence on the Federal Reserve's monetary policy decisions.

According to CME Fedwatch tool current market expectations indicate there is a strong likelihood of a 25-basis-point interest rate reduction, with an 90.2% probability, while the odds of rates remaining unchanged are at 9.8%.

In China, GDP grew 4.6% year-over-year, meeting expectations but falling short of the previous quarter's growth rate. Quarter-over-quarter growth slightly missed forecasts, and year-to-date GDP remained below the government's 5% annual target. While mildly positive, the GDP data highlighted the need for further economic stimulus from Beijing, despite recent efforts to boost the economy.

In other news, European stock markets edged lower early on Friday, as investors digested the latest ECB interest rate cut. The ECB lowered its main refinancing rate by 25 basis points, as anticipated, following a similar cut in September. While this move was expected, the accelerating pace of rate cuts indicates a deteriorating economic outlook despite signs of easing inflation.

U.S. stock market benchmarks edged moderately higher for a second consecutive session on Thursday with the US 500 up by 0.22%, the US 30 gaining another 0.49% to hit new record hights and the US tech 100 rising by 0.45%. A standout performer was Netflix, whose stock surged following better-than-expected third-quarter earnings. Technology stocks also benefited from positive earnings reports from chipmakers, after positive earnings from industry bellwether TSMC. Additional support came from stronger-than-expected retail sales data which further underpinned inflation expectations.

Some key events later today include the U.K. monthly retail sales numbers, U.S. building permits and housing starts, the US Federal Budget Balance and a speech by FOMC member Waller.

EUR/USD

The EUR/USD pair remains under pressure following the European Central Bank’s (ECB) quarter-point rate cut on Thursday. The currency pair has now extended its recent downtrend ending the session 0.27% lower.

In line with market expectations, the ECB reduced its key interest rates by 25 basis points, bringing the Deposit Facility Rate to 3.25% and the Main Refinancing Operations Rate to 3.4%.

With policymakers facing an increasingly unbalanced economy leaning towards a deeper slowdown, investor confidence remains muted despite leaders' reassurances.

Meanwhile, U.S. economic data continues to beat expectations. Retail sales grew by 0.4% in September. Excluding automotive sales, retail growth was even stronger at 0.5%, far exceeding the anticipated 0.1% increase.

Additionally, U.S. initial jobless claims for the week ending October 11 came in at 241,000, beating expectations of 260,000 and reflecting continued resilience in the labor market.

Gold

Gold prices surged to a new record high during Thursday’s session, reaching $2,697. However, the precious metal fell short of breaching the $2,700 mark as uncertainty surrounding the upcoming U.S. elections kept investors cautious.

Despite the release of stronger-than-expected U.S. economic data, including resilient Retail Sales and lower Initial Jobless Claims, gold remained largely unaffected.

Meanwhile, the Atlanta Federal Reserve’s latest GDP Now estimate increased U.S. growth projections to 3.4% from 3.2% on October 9, reflecting ongoing economic strength.

WTI Oil

Oil prices edged up on Thursday, recovering slightly from recent two-week lows after U.S. data showed a decline in crude and fuel inventories.

The latest report from the U.S. Energy Information Administration (EIA) showed that U.S. crude inventories fell by 2.2 million barrels to 420.6 million barrels in the week ending October 11, defying analysts' expectations for a 1.8 million-barrel increase. Gasoline and distillate inventories also declined, signaling stronger demand.

Geopolitical concerns remain a key factor in oil markets. Investors are closely watching potential retaliatory actions from Israel following Iran’s missile strike on October 1, which could disrupt global oil supplies.

US 500

U.S. main indexes ended the session on Thursday adding gains after strong retail sales data and a rally in Taiwan Semiconductor Manufacturing Co. (TSMC) following robust Q3 earnings and guidance.

Taiwan Semiconductor Manufacturing surged over 9% after reporting a net profit of T$325.26 billion ($10.1 billion) for the third quarter, exceeding analysts' expectations of T$300.2 billion. T

The positive results from TSMC come shortly after semiconductor equipment maker ASML issued a more cautious sales forecast for 2025, citing slower demand in sectors outside of AI.

Retail sales in the U.S. rose by 0.4% in September, beating economists' expectations of a 0.3% increase and accelerating from a 0.1% gain in August, according to the Commerce Department.

U.K. Retail Sales, U.S. Building Permits & Housing Starts, Federal Budget Balance

EUR/USD

Gold

WTI Oil

US 500

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